India’s Economic Future

Harsh recently wrote an excellent piece on how India’s economy will grow from the current $2.5 trillion GDP to $12 trillion by 2030. His prediction rests on on two planks: increasing participation of women in the workforce, and technological change.

The Solow growth model – one of the few economics topics I actually remember something about from business school – takes three inputs, namely capital, labour and productivity growth, to project what the future output of an economy might be. Harsh has made a persuasive case from first principles, on how an increase in women’s participation in the workforce combined with the mobile internet revolution will propel India’s GDP to $12 trillion by 2030.

These media reports add a lot of colour to what can sound like a routine development – it is anything but that:

Rural Indian Girls Chase Big-City Dreams

Latest HRD survey shows girls going to college out number boys in seven states

Their Postcards For 2018: From 18 places, girls who turned 18 this year speakĀ out

Harsh’s point on technology too is visible and obvious – Reliance Jio’s entry into telecom is making 4G mobile connectivity ubiquitous. Over the next 3-4 years, we should see 5G (with speeds on the order of hundreds of MB per second) rolled out across India. Consider what this will do for education, health care, media and entertainment. The possibilities are enormous.

Last year, I had co-authored two op-eds with investor Navroz Udwadia on how India can achieve sustained double-digit growth, by fixing the banking sector and building infrastructure for agriculture. The former addresses the capital piece of the Solow model, the latter helps increase productivity for agriculture through “technological” interventions. The introduction of GST too is a technological step change, the longer-term benefits of which monthly or quarterly economic data cannot capture.

There are real changes underway in how India allocates capital, in the composition of our labour force, and in technology. These will all mutually reinforce each other and the gains will compound. It can be difficult to see the bigger picture when we ourselves are inside the frame. I feel very positive about India’s economic future. It’s a great time to invest in India and to be an entrepreneur here.